How do I setup word document for note taking

One simple way to get a margin would be to add a comment ("Notes" or "Use this space for notes") to the end of the first line of the document. This will cause the markup area to be displayed, and when you print the document, the default settings will be "Document showing markup." This will cause the document to print reduced into the top left corner of the page, leaving space on the right and at the bottom for notes.

The advantage to this approach is that the layout of the document is not changed, and removing the comment (or printing without markup) will give you the original version.

There is nothing explicitly designed to do that, but there are several features you can use to emulate the feature.

Change paragraph line spacing from single to double, triple or wider so people can write their notes between the lines, immediately next to the relevant body text.

Change the margins to provide a Wide left, or right or bottom margin

Create a wide footer starting with a line to separate it from body text and word "NOTES:" to indicate purpose.  Optionally You can also add lines for people to write on.

Those are the obvious options that pop up. I'm other people will be able to suggest more.

My personal favorite is to provide people with an e-copy of the document file. Let them make notes directly in the file in the way that suits them best: hidden text embedded directly in the body text, using the comment feature, using the track changes feature, plus the options I suggested.